You can never really tell which industries are genuinely recession-proof.
However, some industries fare well and even thrive during the worst times. This is because these industries typically offer products or services that people can’t go without, regardless of the country’s state of affairs.
This article explains what makes an industry recession-proof and the top 10 industries that can thrive during a recession.
What is a recession?
A recession is a significant decrease in economic activity that can last for months or even years. It’s when a nation’s economy sees negative gross domestic product (GDP), increasing the levels of unemployment, a decline in retail sales, and contracting measures of income and manufacturing for a longer time.
What makes an industry recession-proof?
Recession-proof industries will continue to have stable revenue streams regardless of the economy.
Examples of industry recession-proof industries are those that sell consumer essentials, provide critical repair services, manufacture proprietary products, or provide mandated services.
Companies not recession-proof may experience cash flow issues that compel them to reduce expenses, lay off employees, and take on debt to stay afloat.
Investors have the chance to earn from market downturns if they can accurately identify recession-proof companies.
Below is a list of the top 10 industries that thrive during a recession.
Top 10 Industries That Can Thrive During a Recession
1. Health Care
Even in a recession and with the heightened needs of the COVID-19 pandemic, there is a great need for healthcare and social assistance professionals.
While many industries are facing an unprecedented crisis, the healthcare industry is uniquely affected, given this crisis’s nature. This industry had one of the lowest percentage increases in unemployment during the Great Recession, making it one of the most recession-resistant job sectors.
Healthcare startups are less able to sustain losses while also making debt payments. Therefore, it may be wise to stay away from biotech firms still in their early stages and stick with health care stocks with low debt-to-equity ratios.
2. Utilities
Utilities are an excellent investment for surviving during economic downturns.
They are about as steady as things get because regardless of how the economy is doing, we typically don’t change how much we use electricity, water, or other utilities. Fewer shocks result from this, which may be what some investors want.
Most offer reliable dividends that can also generate income. Interest rates often decline during recessionary periods, allowing utilities to borrow money at lower rates to upgrade or maintain their systems. They also frequently have strict regulations, discouraging the most significant new competition.
3. Groceries
One of the best businesses in a bad economy is a grocery store.
People always need to eat, and during tough economic times, they frequently forgo eating out and ordering takeout, which causes grocery sales to soar even higher.
4. Cleaning products and sanitation services
While others may give up their home cleaning service and do it themselves, other cleaning services remain vital.
A company or other commercial establishments must maintain clean and hygienic conditions, even during a recession, to maintain a safe and sanitary atmosphere.
The coronavirus outbreak hasn’t lessened the need for cleaning services at all. In November 2020, during the Second National Lockdown in the UK, the number of people searching for cleaning services was twice the same as in 2018.
5. Discount Retailers
Given that consumer income is reduced during recessions, discount retailers generally thrive during recessions. When customers’ earnings decline, they have two options: they can either buy fewer items or substitute cheaper goods.
They can’t just cut them out of your budget because there is a minimum amount of staple products, such as food and basic household supplies, that you must purchase. That implies they will seek less expensive options to save money on them.
As a result, discount retailers do well in a recession.
6. Freight and Logistics
Whether there is a recession or not, goods must be transported.
Businesses that succeed during recession offer goods or services that people will always need or make them happy. Freight and logistics routinely weather recessions because they provide both conveniences and necessities.
7. Baby Products And Services
Baby products and services are almost entirely recession-proof.
Babies will continue to be born, and parents will need the materials and services to provide care. This includes baby food, formula, diapers, bath and hygiene supplies, and toys. Parents will make additional cuts so they may at least still treat their children.
8. DIY and Repairs
Things will break even when the economy is terrible, and people will still need repairs and maintenance on their houses and vehicles.
9. Financial Advisors and Accountants
Everyone worries about their financial future when the industry goes into a bear market.
People want to ensure their investments are secure or even make new investments. Businesses rely on financial professionals or accountants to help them navigate challenging times. These are valuable talents in any economy, particularly during a recession.
Both businesses and people still have tax filing and financial decision-making to do. And while some people may continue to do these things independently, others will seek professional counsel to save money or lessen their tax liability. This implies that the professions of accountants, tax experts, and financial consultants will remain to thrive.
10. Debt Collection
Debt collection is undoubtedly a recession-proof industry, as a terrible reality of recessions is that many people struggle to make ends meet when the economy is awful. People become behind on their power bills, car payment, and medical expenditures.
Summary
A recession is not always bad for businesses, as some sectors might thrive during one because their products are necessities, not luxuries.
Knowing which sectors thrive during a bad economy might help you create a strategy for locating steady employment or safe investments that won’t leave you without a job or money.
While not all-inclusive, this list of recession-proof industries might be a good place to start as you prepare for tough economic times.
If you want to know more about what to do or what to invest in during a recession, give us a call today.
Rest assured that someone from our team will get in touch with you and answer all your questions.
